Avon Parnell Ltd v Chevin

[2020] NZHC 976

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1119

[2020] NZHC 976

BETWEEN

AVON PARNELL LIMITED

First Plaintiff

RYAN MATTHEW LEGGATT
Second Plaintiff

AND

PETER LOUIS CHEVIN

First Defendant

CLARK VINCENT VALMONT AND RUSSELL PKR TRUSTEE LIMITED

Second Defendants

Hearing:	12 May 2020
Appearances:	D J Chisholm QC for the Plaintiffs D M O’Neill for the Sixth Defendant
Judgment:	14 May 2020

JUDGMENT OF MUIR J

(Interim Injunction)

This judgment was delivered by me on Wednesday 14 May 2020 at 4.00 pm Pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:…………………………

Counsel:

D J Chisholm QC, Barrister, Auckland D O’Neill, Barrister, Hamilton

Solicitors:

P Nolan, Solicitor, Auckland

A Fletcher, Evans Bailey, Hamilton

AVON PARNELL LIMITED v CHEVIN [2020] NZHC 976 [14 May 2020]

GRAEME HAYWARD SKEATES

Third Defendant

NORTHERN INVESTORS TRUSTEE LIMITED
Fourth Defendant

VIADUCT HARBOUR NOMINEES LIMITED

Fifth Defendant

BASECORP FINANCE LIMITED
Sixth Defendant

Introduction

[1]                  The first plaintiff Avon Parnell Limited (APL) seeks an interim injunction restraining the sixth defendant Basecorp Finance Limited (Basecorp), from exercising its powers as a mortgagee in respect of two cross-leased and adjacent properties in Parnell (the Avon Street Properties).

[2]                  The application raises, albeit at this stage on a “serious question” basis only, the often vexing issue of who among two innocent parties should bear the loss occasioned by fraud.

Background

[3]                  The facts are not substantially in dispute, at least for the purposes of the present application.

[4]                  At all times since its incorporation on 29 April 2015, APL’s sole director and shareholder was the second plaintiff Mr Ryan Leggatt, son-in-law of well-known Auckland property investor and money-lender Mr Timothy Edney.

[5]                  The first defendant, Mr Peter Chevin and Mr Edney have, in the past, had various business dealings. Mr Edney’s interests claim that Mr Chevin is significantly indebted to them. It appears that Mr Chevin assisted in the incorporation of APL, and through that connection obtained the log in and or password details which were necessary to effect online changes to the particulars of APL’s registration with the Companies Office.

[6]                  Mr Chevin has a chequered commercial history with multiple bankruptcies and several criminal convictions. He is currently disqualified from managing a company.

[7]                  Although not material to the present application, Mr Chevin claims that as a result of an agreement reached with Mr Edney immediately prior to the events in question, the Avon Street Properties were held by APL on a bare trust for him.

[8]                  The first-named second defendant, Mr Valmont, is the sole director and shareholder of the second-named second defendant, Russell PKR Trustee Limited (Russell PKR). On 21 and 22 May 2019 and without the knowledge or consent of  Mr Leggatt as APL’s sole director and shareholder, Mr Chevin gave notices to the Registrar of Companies (the Registrar) which on their face purported to record:

(a)the removal of Mr Leggatt as the sole director of APL effective 21 May 2019;

(b)the removal of Mr Leggatt as the sole shareholder of APL;

(c)the appointment of Mr Valmont as the sole director of APL effective 21 May 2019;1 and

(d)a transfer of the shareholding in APL to Russell PKR.

[9]It is common ground that Mr Leggatt never knew or consented to:

(a)Mr Chevin lodging particulars of change of director and shareholder with the Registrar;

(b)the transfer of Mr Leggatt’s shareholding in APL to Russell PKR;

(c)His  resignation  as  a  director  of  APL  and  the  appointment  of   Mr Valmont as the company’s sole director.

[10]              A day later, on 23 May 2019, Mr Chevin and/or Mr Valmont, opened a bank account in the name of APL with Kiwi Bank.

[11]              On 24 May 2019 Mr Valmont executed, for and on behalf of APL, a secured loan agreement with Basecorp (the loan agreement). The security was the Avon Street Properties. For the purposes of the present application it is common ground that Basecorp was unaware of any impropriety associated either with the removal of

1      Comprising a consent to appointment signed by Mr Valmont, and completed by Mr Chevin.

Mr Leggatt and appointment of Mr Valmont or Mr Valmont’s subsequent execution of the loan agreement.

[12]              The same day $1,000,000 was advanced by Basecorp to the solicitor purportedly acting for APL. Of that, $990,000 was immediately paid out from the solicitor’s trust account to APL’s recently opened Kiwi Bank account. A further simultaneous transfer was then made by Mr Chevin or Mr Valmont to an ASB Bank account in the name of the fourth defendant Northern Investors Trustee Limited (now in liquidation).

[13]              On 19 June 2019 this Court granted freezing orders restraining Mr Chevin and the second to fourth defendants from dealing with the funds that had been advanced by Basecorp. Of the amount advanced, the sum of $310,387.18 has since been recovered and repaid to Basecorp. In the interim Mr Valmont has actively co-operated with APL by resigning as its director. On 3 July 2019 Mr Leggatt was reinstated to that position.

[14]On 22 October 2019 Basecorp made demand on APL for the sum of

$763,339.77 being the amount then outstanding under the loan agreement. Subsequently it served a notice on APL pursuant to s 119 of the Property Law Act 2007. A mortgagee sale is intended in the event APL’s application is unsuccessful.

The relevant test

[15]For APL to be granted relief it must, in the usual way, demonstrate that:

(a)there is a serious question to be tried in terms of its allegation that it is not bound by the loan agreement.2

(b)the balance of convenience favours the relief sought; and

2      The central issue in this respect is a legal one. If on the facts presented the law can give the plaintiff no remedy then the plaintiff cannot obtain interim relief (Shotover Gorge Jetboat Ltd v Marine Enterprises Ltd [1984] 2 NZLR 154 (HC) at 157). On an interim injunction application, a full examination of the legal issues may be necessary. By the same token, however, a court is not required finally to “decide difficult questions of law which call for detailed argument and mature considerations” (refer American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407.

(c)such relief is in the overall interests of justice.

[16]              These inquiries occur against the backdrop of what are, for present purposes, two unlawful acts;3

(a)Presentation by Mr Chevin to the Registrar of particulars of change of director and shareholder when such occurred without the knowledge or consent of Mr Leggatt as the sole director and shareholder of the company.

(b)Unauthorised execution of the Basecorp loan agreement and mortgage documents by Mr Valmont, purportedly acting on behalf of APL.

The issues

[17]              The central issue in the case is whether, to the standard required on an interim injunction, APL satisfies me that s 18 of the Companies Act 1993 (the Act) does not have the effect of rendering APL liable on the loan agreement.

[18]              If it can do so then there are subsidiary inquiries in terms of balance of convenience and overall interests of justice. However, although Basecorp’s written submissions suggested these inquiries should be answered in its favour, the point was not pressed at the hearing.

Sections 18 and 159 of the Act

[19]Section 18 provides:

18       Dealings between company and other persons

(1)        A company or a guarantor of an obligation of a company may not assert against a person dealing with the company or with a person who has acquired property, rights, or interests from the company that—

(a)this Act or the constitution of the company has not been complied with:

3      The parties are agreed that for present purposes the first of these may be described as fraudulent, however, I make no finding in that respect.   It will be a matter for trial in due course, as will   Mr Valmont’s knowledge and therefore complicity in the scheme.

(b)a person named as a director of the company in the most recent notice received by the Registrar under section 159 of this Act—

(i)is not a director of a company; or

(ii)has not been duly appointed; or

(iii)does not have authority to exercise a power which a director of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

(c)a person held out by the company as a director, employee, or agent of the company—

(i)has not been duly appointed; or

(ii)does not have authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

(d)a person held out by the company as a director, employee, or agent of the company with authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company does not customarily have authority to exercise, does not have authority to exercise that power:

(e)a document issued on behalf of a company by a director, employee, or agent of the company with actual or usual authority to issue the document is not valid or not genuine—

unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the matters referred to in any of paragraphs (a), (b), (c), (d), or (e), as the case may be, of this subsection.

(2)        Subsection (1) of this section applies even though a person of the kind referred to in paragraphs (b) to (e) of that subsection acts fraudulently or forges a document that appears to have been signed on behalf of the company, unless the person dealing with the company or with a person who has acquired property, rights, or interests from the company has actual knowledge of the fraud or forgery.

[20]Section 159 in turn provides:

159      Notice of change of directors

(1)        The board of a company must ensure that notice in the prescribed form of—

(a)a change in the directors of a company, whether as the result of a director ceasing to hold office or the appointment of a new director, or both; or

(b)a change in the name or the residential address of a director of a company—

is delivered to the Registrar for registration.

(2)A notice under subsection (1) of this section must—

(a)specify the date of the change; and

(b)include, in relation to every person who is a director of the company from the date of the notice, the information required by section 12(2)(b)(i) to (iii); and

(c)in the case of the appointment of a new director, have attached the form of consent and certificate required pursuant to section 152 of this Act; and

(d)be delivered to the Registrar within 20 working days of—

(i)the change occurring, in the case of the appointment or resignation of a director; or

(ii)the company first becoming aware of the change, in the case of the death of a director or a change in the name or residential address of a director.

(3)        If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2) of this Act.

APL’s case

[21]              APL submits that s 18 represents a codification of the common law position relating to the so-called “indoor management rule”.4 It says that Basecorp attempts to stand those principles on their head by effectively arguing that, for the purposes of the doctrine of apparent/ostensible authority, the relevant representation need not in the case of fraud, be made by the principal, but can effectively be made by the agent . It says that Basecorp’s argument assumes that, irrespective of how Mr Valmont came to appear as APL’s sole director on the Register, and even if APL was in no sense responsible for this having occurred and made no representation as to his status, at the point the Registrar recorded him as APL’s sole director the company was, as a matter

4      The origins of which lie in Royal British Bank v Turquand (1856) 6 E&B 327, 119 ER 886.

of law, precluded from denying his authority to enter into transactions of the kind which a sole director customarily has the authority to do.5

[22]              Next, APL says that Basecorp’s argument assumes Mr Valmont was a person named as a director “in the most recent notice received by the Registrar under s 159 of this Act”,6 when, in fact, s 159 references changes to directors made by “the Board”. APL says Mr Leggatt was the only person authorised to provide a notice of change of directors to the Registrar and that what was provided by Mr Chevin was a nullity.

[23]              Thirdly, it says that Basecorp’s position is not saved by s 18(2) because that subsection presupposes that the underlying common law criteria – namely that the party acting fraudulently has been invested with apparent/ostensible authority by the company – have been satisfied. So, it says, a validly appointed director who enters into a fraudulent transaction with a lender who is itself unaware of the fraud will nevertheless bind his principal. But a person who purports to be a director, who does so without any representation having been made by the company to that effect, and who subsequently enters into such a transaction, will not do so. In making that submission APL relies on the New South Wales Supreme Court decision in Wood v Inglis7 which has recently been applied by the same Court in Winau Australia v LCC Property Development PTY Ltd.8

[24]              Mr Chisholm QC submits that Basecorp attempts to “conflate” the fraud protection in s 18(2) with the necessary antecedent inquiry – has the company held Mr Valmont out to be a director by virtue of a notice under s 159? He acknowledges (as he must do, consistently with underlying principle) that, if Mr Valmont had been appointed by the company (albeit with some irregularity in the process), then APL would be bound by the loan agreement. However, he says that does not extend to a situation where, as here, the purported notice under s 159 was not the notice of “the board of [the] company” as provided for in that section. He further distinguishes

5      I accept for the purposes of this application that a sole director has such customary authority in respect of execution of loan documentation cf the position in respect of one of two or more directors see Autumn Tree Ltd v Bishop Warden Property Holdings Ltd [2017] NZHC 2838, [2018] NZAR 336.

6      Companies Act 1993 at s 18(1)(b).

7      Wood v Inglis [2008] NSWSC 1147, (2008) 68 ACSR 420 at [90] - [95].

8      Winau Australia v LCC Property Development PTY Ltd [2020] NSWSC 434.

between the acts of Mr Chevin, who he says is not “a person of the kind referred to in paragraphs (b) to (e)” as referenced in s 18(2), and the acts of Mr Valmont. He submits that in respect of Mr Chevin’s acts, Basecorp is not able to avail itself of any statutory protection.

Basecorp’s case

[25]              Basecorp says that it is the innocent victim of Mr Chevin and Mr Valmont’s actions. It accepts that APL is in a similar position but says there is no reasonably arguable defence to the proposition that, as a result of s 18 of the Act, and as between the two innocent parties involved, the loss properly falls on APL.

[26]              Basecorp submits that s 18(2) expands the common law position to a point where, if fraud is involved, an innocent third party can effectively rely on an agent’s own representation of authority (here the representation by Mr Valmont that he was APL’s properly appointed sole director). It distinguishes the Australian authorities on the basis that the s 18(2) equivalent9 references fraudulent acts by “officers” or “agents” and therefore presupposes validity of appointment unlike the New Zealand position where a fraudulently appointed director will, it says, bind the company.

Discussion

[27]              Surprisingly, the question of whether a company is bound by the actions of a “director” whom it has never purported to appoint but whose name appears as a director in the records of the Companies Office does not seem to have been the subject of any previous New Zealand case. As indicated, there have however been two recent Australian decisions under what is broadly equivalent legislation. I will discuss those decisions and the differences in the statutory provisions shortly.

[28]              I start by accepting Mr Chisholm’s basic proposition that s 18 was intended, essentially, to codify the common law position under the line of authorities commencing with Turquand’s case.10 In the Law Commission’s 1989 report,

9 Corporations Act 2001 (Cth) at s 128(3).

10     Royal British Bank v Turquand (1856) 6 E&B 327, 119 ER 886.

Company Law: Reform and Restatement, which predicated the latest iteration of the Act, the following observations were made:11

Authority to bind is dealt with in section 9 and in Part 9 of the draft Act. These provisions are a statement of the rule in Royal British Bank v Turquand (1856) E&B 327; 119 ER 886. By that decision, an outsider dealing with the company is entitled to assume that the company’s internal procedures have been properly complied with and that persons acting on its behalf do so with its authority. The section follows Canadian precedents (see section 19 of the Ontario Business Corporation Act 1982). It is largely a reinstatement of the common law, including normal agency principles, but makes it explicit that the position is not affected by fraud unless the third party has actual knowledge of the fraud. Constructive notice of the company constitution by reason of its registration will not affect the ability of a third party to rely upon the authority of the agent contracting on behalf of the company, but the third party is not protected in cases of actual knowledge. In this, the draft Act follows the existing provision of section 18C and the Canadian models.

[29]              In respect of the former s 18C (which was in the same terms), the Court of Appeal has likewise said that:12

The section may add little if anything to the ordinary principles of apparent authorities applied in a company context.

[30]              The section appears to have originated in provisions drafted by Professor Gower for Ghana’s Company Code and subsequently adopted in Canada, Australia, New Zealand and the United Kingdom.13 I accept therefore that (subject to the idiosyncrasies of each country’s specific provisions) there is merit in consistent interpretation.

[31]              I accept also Mr Chisholm’s proposition that s 18 is grounded in the principles of apparent/ostensible authority. Obviously the most conspicuous means by which a company can invest a person with such authority is by appointment as a director but the section goes on to contemplate actions by a person “held out by the company as a director, employee or agent”.14 Such actions will similarly bind the company and third parties may rely on them without inquiry into the company’s adherence to internal procedures.

11     Law Commission Company Law: Reform and Restatement (NZLCR9, 1989) at 349.

12     Cromwell Corporation v Sofrana Immobilier (1992) 6 NZCLC 67,997 at 68,012

13     At 68,011.

14     Referring to ss 18(1)(c) and (d) of the Companies Act 1993.

[32]              As indicated, however, the essential question in this case is whether a person, who appears as a director of a company as a result of fraud, similarly binds the company.

[33]              Mr Chisholm is correct that the operative fraud here appears to be not that of Mr Valmont – the person appearing on the Register as the company’s director for the purposes of s 18(1)(b), but that of Mr Chevin.15 Mr O’Neill’s proposition is, however, that s 18(2) is wide enough to capture that situation.

[34] The Australian cases which have addressed this issue are decided under ss 128 and 129 of their Corporations Act 2001. I will again set out the relevant provisions for comparative purposes.

128Entitlement to make assumptions

(1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

(2) A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

(3)        The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings.

(4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.

129Assumptions that can be made under section 128

Constitution and replaceable rules complied with

(1)        A person may assume that the company’s constitution (if any), and any provisions of this Act that apply to the company as replaceable rules, have been complied with.

Director or company secretary

15     I again emphasise that I make no finding against Mr Chevin at this stage. My judgment proceeds on the basis of the assumed position for the purposes of this application.

(2)        A person may assume that anyone who appears, from information provided by the company that is available to the public from ASIC, to be a director or a company secretary of the company:

(a)has been duly appointed; and

(b)has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company.

[35]              In Wood v Inglis16 Barnett J held that information given to the Australian Securities and Investment Commission (ASIC) by two women purporting to act as directors of the relevant company did not constitute the action of the company, which was only capable of acting through its board of directors. Consequently, anything done by the company which was not traceable back to the authority of the board of directors, was held not to bind the company. As his Honour noted:17

[92]      It must be inferred that the information given to ASIC that caused the records to be in that state was given by or at the direction of Kathryn Clark and Pamela Wood. They had purported to act as the directors of the company after 31 December 2007, relying on the validity of the supposed resolutions of members to remove Helen Inglis as a director and to appoint Pamela Wood as a director. Lodgement with ASIC of a notice of change in officeholders may be presumed to have been among the actions they took or procured to be taken.

[93]      The lodgement with ASIC and the notification it conveyed suffered from the same vice as the making of the retainer agreement with ClarkeKann. It was not something done by IRPL which, at the time, was capable of acting only through a board of directors consisting of Helen Inglis and Kathryn Clark. Anything purportedly done by the company that was not traceable to the authority of that board of directors was not done by IRPL.

[94] It follows that the information available from ASIC as to the particulars of the company’s directors, as already described, was not “information provided by the company” as referred to in s 129(2). It was information provided without the authority of the company duly given. It follows that, on 8 May 2008, ClarkeKann were not entitled to make any assumption by virtue of that section that Pamela Wood was a director and Helen Inglis was not a director.”

(Emphasis added)

[36]              The same approach was adopted in the recent decision of Winau Aust v LCC Property Development Pty Ltd18 where the facts were very close to those in the present case. The Court found that it was not possible for the mortgagee to rely on the

16     Wood v Inglis [2008] NZSWSC 1147, (2008) 68 ACSR 420.

17     At [92]-[94].

18     Winau Aust v LCC Property Development Pty Ltd [2020] NSWSC 434.

assumptions in ss 128 and 129 of the Corporations Act, because the relevant Officer Change Notice was signed by a fraudster who was not an appointed director or officer of the company. As Kunc J noted:

[112]          In this case, there is no doubt that Mr Chan was not a duly appointed director of 183 Eastwood and had neither actual nor ostensible authority to do anything on its behalf. Put simply, his acts were not those of 183 Eastwood and could not, in law, be attributed to 183 Eastwood. Contrary to the argument put for the Mortgagees, Mr Chan was not 183 Eastwood, and when Mr Chan did something it was not 183 Eastwood doing it. For example, he did not have the actual or ostensible authority of 183 Eastwood to receive any advance from the Mortgagees on its behalf or sign the Cheque Directions on its behalf. Critically for the purposes of this case, nor did Mr Chan have any such authority to establish the Westpac Bank Account on behalf of 183 Eastwood.

[113]         It is convenient at this point to record that during the course of argument Mr Derossian made it clear that the Mortgagees were not relying on the assumption under ss 128 and 129 of the CA. They were, with respect, correct not to do so. For example, because the Officer Change Notice was signed by Mr Chan – who was not a properly appointed director or officer of 183 Eastwood – and submitted on his instructions, the information in those notices was not “information provided by the company” for the purposes of s 129(2) of the CA and therefore could not be relied upon …

[115] In this case, the banker-customer contract which gave rise to the Westpac Bank Account was not between 183 Eastwood and Westpac because Mr Chan had neither actual nor ostensible authority to enter into such a contract by opening an account in 183 Eastwood’s name. Although not strictly relevant to this part of the analysis, it can be noted that even as between Westpac and 183 Eastwood, Westpac would not have been able to rely on the publicly available information that Mr Chan was a director of 183 Eastwood for the reasons identified in paragraph [113] above.

(Emphasis added)

[37] Mr O’Neill says that little weight should be placed on these cases for the reason previously indicated. However, I am not persuaded by that argument (at least to the standard I would need to be before dismissing the application). Neither of the Australian cases appear premised on the assumption that the purported directors were not either “officers” or “agents” for the purposes of s 128(3). Rather, they focus on s 129(2) and the fact that for the relevant “assumption” to be recognised, the person who appears as a director in ASIC’s records must do so “from information provided by the company”. Wood v Inglis19 refers to a requirement that the purported act must be “traceable” to the authority of the board of directors. Such approach is, in turn,

19     Wood v Inglis [2008] NZSWSC 1147, (2008) 68 ACSR 420 at [93].

consistent with the common law underpinnings of the section and its New Zealand equivalent.

[38] Turning then to the specific wording of s 129(2) of the Corporations Act, there is in my view an analogy between its requirement that the information on the Register be derived from “information provided by the company” and s 18(1)(b) in the New Zealand legislation, whereby the person named on the Register be a person identified in “the most recent notice received by the Registrar under s 159 of this Act”. That is because s 159 in turn provides for provision of information by “the board of a company”. In the present case notification of the removal of Mr Leggatt and appointment of Mr Valmont was not a function of any action authorised by the board. Just as the relevant information was not “provided by the company” in Winau Aust,20 so the board of APL never provided the relevant notice.

[39]              In coming to that conclusion, I acknowledge that I differ from Susan Watson in her Westlaw Company Law commentary.21 She appears to suggest that a fraudulent notice under s 159 may be sufficient for the purposes of s 18(1)(b). She does not, however, elaborate on the suggestion and I respectfully differ, at least to the extent required to answer the “serious question” inquiry in the present case. And in this case Basecorp faces the additional problem that s 18(2) is directed to the fraud of the person who purports to act as agent of the company – “a person of the kind referred to in paragraphs (b)-(e)”. Mr Chevin does not fall into that category.

[40]              I conclude therefore that APL establishes a serious question as to whether it is bound by the loan document on which Basecorp’s mortgage is premised.

Balance of convenience

[41]              This in my view favours APL. The property is not subject to any other mortgage and Basecorp’s position (if correct) is adequately secured (including in respect of ongoing interest) pending a trial of the substantive proceedings. This has been set down for hearing (of eight days) commencing 22 March 2021.

20     Winau Aust v LCC Property Development Pty Ltd [2020] NSWSC 434 at [113].

21     Susan Watson – Westlaw – Company Law – A-Z of New Zealand law – transactions involving entry of the director’s name on the public register s 18(1)(b) at 16.13.11, see footnote 198.

[42]              Conduct under mortgagee sale would, I accept, have the likely consequence of depreciating the sale price of the property, and any realisation in the next one to three months could face additional market headwinds as a result of the current Covid-19 crisis.

[43]              I accept, as Basecorp suggests, that APL may be in a position to refinance, but when I weigh the security Basecorp enjoys in respect of ongoing interest against the difficulties APL may face in endeavouring to recover the costs of refinancing from either Mr Chevin or Mr Valmont, the balance of conveyance lies firmly in APL’s favour. That conclusion is fortified by the recent liquidation of each of Russell PKR, Northern Investors Trustee Limited and Viaduct Harbour  Nominees  Limited.  As Mr O’Neill acknowledges, the only likely solvent parties to the litigation are APL, Basecorp and the solicitor that purported to act for APL on the loan agreement (Mr Skeates).

The overall interests of justice

[44]              These in my view again favour APL. Although I am only required to address the underlying legal issue on a “serious question” basis, my assessment is that APL comfortably meets that hurdle. I do not consider Basecorp materially prejudiced by the 10 month delay before the substantive proceedings are heard. By contrast, however, the prejudice to APL from a mortgagee sale could be significant.

Result

[45]              I make orders (pending further order of the Court) restraining the sixth defendant, its employees or agents from:

(a)Exercising or purporting to exercise any powers as a mortgagee under mortgage instrument 11448874.1 (the mortgage) in respect of the properties at 20 and 22 Avon Street, Parnell.

(b)Exercising or purporting to exercise any power of sale under the mortgage including any related powers such as advertising.

Costs

[46]              In the absence of agreement (which is my expectation) memoranda (maximum three pages plus any schedules) may be filed. Provisionally I consider a 2B allocation appropriate with a hearing time of 0.2 of a day.

Muir J